General population multilevel studies of social capital and mental health are few in number. This multilevel study examined external measures of neighbourhood social capital and common mental disorders (CMD). Main effects and stress buffering models were tested. Based on data from over 9000 residents in 239 neighbourhoods in England and Scotland, there was no evidence of a main effect of social capital. For people living in deprived circumstances only, associations between neighbourhood social capital and CMD were seen. Elements of bridging social capital (contact amongst local friends) were associated with lower reporting of CMD. Elements of bonding social capital (attachment to neighbourhood) were associated with higher reporting of CMD. Findings provide some support for the hypothesis that social capital may protect against CMD, but indicate that initiatives should be targeted to deprived groups, focus on specific elements of social capital and not neglect the important relationship between personal socioeconomic disadvantage and CMD.